US investor optimism declined significantly between February and May, due to rising energy prices, government budget deficits, and persistent unemployment, according to the latest Wells Fargo/Gallup Investor and Retirement Optimism Index. 

The index fell to 33 in May, down from 42 in February, indicating a bearish sentiment - although retirees maintained consistent optimism levels of 61.  In response to the May poll, investors cited the top three factors behind the widespread bearishness as: the price of energy (79 per cent of respondents, up from 60 per cent in February); the federal budget deficit at 75 per cent, and the unemployment rate at 67 per cent.

“The decline of investor optimism among average Americans is concerning,” said David Carroll, senior executive vice president and head of wealth, brokerage and retirement at Wells Fargo.

“It is striking to see that retirees in the US have maintained consistent optimism levels over the past quarter, with the major slide in sentiment concentrated among working Americans who continue to face the pressure of supporting day-to-day expenses in the midst of trying to plan for their future.” 

The May poll found a significant divergence between how retired Americans are funding their retirements and how those yet to retire plan to finance it. Sustaining large losses in wealth from the financial crisis, current retirees are more likely to depend on pensions and Social Security to fund their retirement, the firm notes.  

While the poll’s results suggest younger Americans see retirement saving as the individual’s responsibility, nearly two in three (65 per cent) of the non-retired say the 401(k) will be a major source of retirement funding for them, compared to 37 per cent of the retired, the poll revealed. 

Future healthcare costs rank highest among investors’ concerns about funding their retirement: only one in three non-retired said they had a “great deal of confidence” that they'll be able to fund their healthcare needs in retirement beyond what Medicare offers, says the poll.

“In an environment where the cost of healthcare is the top factor in determining when to retire, having a financial plan that takes into account a range of variables that people may encounter in retirement will put people in a much better position to influence their futures,” said John Papadopulos, head of Wells Fargo Retirement

Therefore, proximity to quality medical facilities tops the list on location for retirement: 60 per cent of people surveyed say this is a “major factor,” followed by taxes and costs of living. 

The Wells Fargo/Gallup Index is based on answers to seven core questions, asked quarterly, in telephone interviews. The current poll was conducted with 1,099 investors aged 18 and older between 2 and 10 May.